The EU's plan, announced Thursday, calls for $157 billion in additional euro-zone loans to Greece to help it cover its debts. The plan also asks private bondholders to voluntarily share in the cost of rescuing the nation by swapping outstanding Greek bonds for longer-term issues that pay lower interest rates.

Many analysts expect credit rating firms to deem Greece in "selective default" because of the bond-swap proposal. That would mark the first time a euro-zone country has defaulted on its debts.

In the Greek bond market, the new bailout plan triggered a huge rally, albeit from severely depressed levels. The annualized yield on two-year Greek bonds (charted at left) plunged to 27.6%, down from 33.8% on Thursday and its lowest level since July 5.

Yields also fell in Ireland and Portugal, both of which also have been bailed out by the EU over the last year. Two-year Irish bond yields slid to 15.1% from 19.1% on Thursday. Portuguese two-year bonds fell to 15.4% from 17.1%.

Still, those interest rates would be prohibitively expensive for the countries to pay if they sought to borrow in the market.

Investors were warier of pushing bond yields lower in Spain and Italy, the countries with the most to lose if the debt crisis were to worsen.

Two-year Spanish bond yields rose to 3.87% from 3.77% on Thursday, though they have fallen from 4.56% on Monday.

Italy's two-year bond yield edged up to 3.65% from 3.62% on Thursday. The yield was 4.57% on Monday.

The view of many analysts remains cautious about declaring an EU victory in the debt crisis. "On the face of it, it seems to indicate an increased willingness for EU leaders to address problems head on," Nomura Securities analysts in Europe said in a report Friday.

But they remained concerned that "the debt relief for Greece probably is not enough to transform its fiscal challenge into something that is feasible. So although the cavalry may have won the battle this week, we think the war is far from over."